The assessee was engaged in the business of manufacturing sheet metal components out of CRPA & OP sheds at Ahmedabad. It decided to sell their entire running business in one go. With this aim in view, it sold their entire running business in one go with all its assets and liabilities on 31.12.1990 to a Company called \u201cAmtrex\u00a0 Appliances Ltd\u201d for Rs.58,53,682. The assessee filed its income tax return for the Assessment Year 1991-1992. In the return, the assessee claimed deduction under Section 48(2) of the Act\u00a0 as\u00a0 it\u00a0 stood then by\u00a0 treating the\u00a0 sale\u00a0 to be in the nature of \u201cslump sale\u201d of the going concern being in the nature of\u00a0\u00a0\u00a0\u00a0 long term capital gain in the hands of the assessee. The \u2018AO\u2019 by his order dated 04.03.1994 did not accept the contention of the assessee in claiming deduction. According to the \u2018AO\u2019,\u00a0 the case of the assessee was covered under Section 50(2)\u00a0\u00a0\u00a0\u00a0 of the Act\u00a0 because it\u00a0 was\u00a0 in\u00a0 the\u00a0 nature of\u00a0 short term capital gain as\u00a0 specified in Section 50(2) of the Act and\u00a0 hence did not\u00a0 fall under Section 48(2) of\u00a0 the\u00a0 Act as claimed by the assessee. The \u2018AO\u2019 accordingly reworked the claim of the deduction treating the same to be falling under Section 50(2) of the Act and framed the assessment order. The assessee, felt aggrieved, filed appeal before the CIT (appeals). By order dated 06.10.1995, the Commissioner (Appeals) allowed\u00a0\u00a0\u00a0 the assessee\u2019s appeal in so far as it related to\u00a0 the\u00a0 issue of\u00a0 deduction. He\u00a0 held that when it is an undisputed fact that the assessee has sold their entire running business in one go with its assets and liabilities at a slump price and, therefore,\u00a0\u00a0 the provisions of Section 50(2) of the Act could not be applied to such sale. He\u00a0 held that it was not a case of sale of any\u00a0individual or\u00a0 one\u00a0 block asset which\u00a0 may attract the provisions of Section 50(2) of the Act. He then examined\u00a0 the case\u00a0 of the assessee in the context of definition of \u201clong term capital gain\u201d and \u201cshort term capital asset\u201d and held that since the undertaking itself is acapital asset<\/p>\n
\u00a0<\/p>\n
\u00a0<\/p>\n
owned by the assessee nearly for six years and being in the nature of long term capital asset and the same having been sold in one go as a running concerned,\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 it cannot be termed a \u201cshort terms capital gain\u201d so as to attract the provisions of Section 50(2) of the Act as was held by the Assessing Officer. The CIT (appeals) accordingly allowed the assessee to claim the deduction as was claimed by them before the Assessing Officer. The Revenue, felt aggrieved of the order of the CIT (appeal), filed appeal before the Income Tax Appellate Tribunal. By order dated 27.06.2002, the Tribunal concurred with the reasoning and the conclusion arrived at by the Commissioner of Appeal and accordingly dismissed the Revenue\u2019s appeal. The Revenue,\u00a0 felt aggrieved of the order of the Tribunal,\u00a0 carried the matter\u00a0 to the High Court in further appeal under Section 260-A of the Act. By impugned order, the High Court dismissed the appeal holding that the appeal does not involve any substantial question of law within the meaning of Section 260-A of\u00a0\u00a0 the Act. It is against this order the Revenue felt aggrieved and carried the matter\u00a0\u00a0\u00a0 to this Court in appeal by way of special leave.<\/p>\n
\u00a0<\/p>\n
Whether provisions of section 50(2), deemed short term capital gains can apply to case where assessee sold entire business as going concern in one go and which\u00a0\u00a0 sale otherwise qualifies as long term capital asset under the Act and resultantly gives rise to \u2018LTCG\u2019 which is thus entitled to be computed with special benefits under then section 48(2) of the Act available to \u2018LTCG\u2019?<\/p>\n
Premier Automobiles Ltd v. ITO (2003) 264 ITR 193 (Bom) (HC), <\/em><\/strong>the Division Bench of the Bombay High Court examined the extant question in detail on somewhat similar facts and has taken the same view. The Learned Judge S. H Kapadia –\u00a0 (as His Lordship then was) speaking for the Bench aptly explained\u00a0 the legal position to which the court in present case has expressed its respectful concurrence as it approved the said Bombay high court view as correctly summarizing the legal position applicable to such facts. Further court took specific note of its earlier decision in case of CIT v.\u00a0 Artex Manufacturing Co. 1997(6)\u00a0\u00a0 SCC 437<\/em><\/strong>which it observed supports the view taken in extant case.<\/p>\n \u00a0<\/p>\n Dismissing the appeal of revenue, the court held that the case of the assessee does not fall within the four corners of Section 50(2) of the Act. Section 50(2) applies\u00a0\u00a0\u00a0 to a case where any block of assets are transferred by the assessee and not where the entire running business with assets and liabilities is sold by the assessee in\u00a0\u00a0 one go.. In simple words, it is held that the provisions of Section 50(2) of the Act would apply to a case where the assessee transfers one or more block of assets, which he was using in running of his business.\u00a0 Such\u00a0 is not the case here\u00a0 because in this case, the assessee sold the entire business as a running concern and so\u00a0\u00a0 court finally gave itsimprimatur to the reasoning in the impugned orders of the<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n CIT (appeal), Tribunal and High Court and upheld the treatment given by assessee under section 48(2) of the \u2018Act\u2019. (AY. 1991-92) (CA No. 4399 of 2007 dt. 18-4-2017)<\/p>\n Editorial <\/em><\/strong>: Provisions of section 48(2) applicable upto Assessment Year 1992-1993 are no longer in statute as such after detailed amendments made by Finance Act 1992 with effect from Assessment Year 1993-1994 as explained by CBDT in its circular no. 636 dated 31.08.1992 and also to slump sale special provisions are inserted in section 50B of the Act by Finance Act 1999 with effect from assessment year 2000-2001 as explained by CBDT in\u00a0 its\u00a0 circular no.\u00a0 779 dt. 14.09.1999 (1999) 240 ITR 3 (St)<\/p>\n \u201cMan should forget his anger before he lies down to sleep.\u201d<\/em><\/p>\n – Mahatma Gandhi<\/p>\n","protected":false},"excerpt":{"rendered":" S. 50 : Capital gains\u2013Slump sale- Deemed\u201d short term capital gains -Undertaking is sold as a running business with all assets and liabilities for a slump price, no part of the consideration can be attributed to depreciable assets-If the undertaking is held for more than three years, it constitutes a “long-term capital asset” and the gains are assessable as a long-term capital gain- Sale of entire business as running concern which qualifies to be long term capital asset is different from sale of one or more block of assets used in business as such. Assessee\u2019s treatment of offering the gains as long term capital gains with consequential benefits under section 48(2) upheld . [S. 45, 48,50(2), 50B]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-13355","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3tp","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13355","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=13355"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13355\/revisions"}],"predecessor-version":[{"id":13356,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13355\/revisions\/13356"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=13355"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=13355"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=13355"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Held<\/h3>\n